Home / Economy / Private consumption as share of GDP continues to decline

NEW DELHI : Private consumption as a share of nominal gross domestic product slipped further to 57.5% in 2021-22 from 58.6% in 2020-21 and 60.5% in 2019-20, pointing to a sustained slowdown in household consumption since the onset of the covid-19 pandemic.

Private consumption— money spent by consumers on buying goods and services— constitutes the biggest chunk of India’s annual GDP.

Data released on Monday in the Economic Survey suggests that the share of private consumption in India’s economy has been declining since the beginning of the pandemic.

“Latest advance estimates suggest full recovery of all components on the demand side in 2021-22 except for private consumption. When compared to pre-pandemic levels, recovery is most significant in exports followed by government consumption and gross fixed capital formation," it said.

Total consumption (when seen as part of real GDP or GDP adjusted for inflation) is estimated to have grown by 7% in 2021-22, according to the survey.

While the survey attributed this to a jump in demand for consumer durables, other categories such as vehicles dipped. Sales of motorcycles, scooters and mopeds in India have continued to slump, as reported by Mint earlier.

“Government consumption is estimated to grow by a strong 7.6% surpassing pre-pandemic levels. Private consumption is also estimated to have improved significantly to recover 97% of corresponding pre-pandemic output level. This is supported by a sharp rebound in high frequency indicators (HFIs) like IIP consumer durables. However, the recent dip in vehicle registrations reflects persistent supply-side constraints owing to the shortage of semi-conductor chips rather than lack of consumption demand," the survey said.

The slump in household demand is not surprising. The pandemic has shifted consumer demand in favour of essential goods; more discretionary purchases, at least among middle-income households, have taken a backseat. With several sectors such as tourism, retail and hospitality still reeling under the impact of the pandemic, incomes have shrunk for many households.

Private consumption is poised to see stronger recovery with rapid coverage in vaccination and faster normalisation of economic activity, the survey said.

Rajat Wahi, partner, Deloitte India, said private consumption may have declined as consumers switched to saving amid the pandemic.

Consumers are also postponing spends on non-essentials and have less disposable income for travel, services and hospitality.



Suneera Tandon

Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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